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Optimism Returning to Dry Bulk

Dry bulk owners are seeing the light at the end of a very long, dark tunnel.

At a Capital Link event in London on Wednesday, executives from six companies said they were expecting better rates next year, as supply-demand fundamentals were showing signs of improvement.

Rates will be 40%-50% higher in 2017 versus this year as the number of newbuilding orders was falling, said Eagle Bulk’s chief executive Gary Vogel – but that is still low versus the average of the past few years.

“There is interest in the sector; it is not overwhelming but for the right investor, it is a great opportunity,” he said during the panel discussion.

Golden Ocean’s chief executive Birgitte Vartdal echoed the sentiment, saying any more increase on the demand side will lead to a positive rate scenario in 2017.

As many as 100 capesizes were idled earlier in the year due to historically low levels, she said, but since rates swung up due to a surprising pull from China, all of those idled vessels are now back in the market.

Western Bulk Chartering’s chief executive Jens Ismar said he was a bit more optimistic because of better coal movements into China but there was also uncertainty, especially as Beijing policy changes with the tide.

It is therefore better to be patient and “play in the short-term market” to extract value, he said.

Scrapping stopped when rates picked up, said Mr Ismar, adding the industry was its own worst enemy.

Seanergy’s chief executive Stamatis Tsantanis said he was “bullish” for 2017.

His company has “investment appetite” following the purchase of two capesize vessels last month. The company had been looking to buy supramax bulkers but the value of those assets moved up by some 40%, he said, whereas capes were hovering around the lowest levels in some years.

They will be looking for more acquisitions in November or December following fundraising, he said.

Scorpio’s managing director in the UK David Morant said his company was in a good position for an upswing, but expects more “short-term turbulence”.

Star Bulk Carriers chief financial officer Simos Spyrou was also a bit more cautious in his approach, expecting just a slight improvement on this year.

“When the market expects a trend, usually the opposite happens,” he said.

The ballast water convention will be helpful and “tip the balance”, said Mr Vogel, while scrapping rates at about $300/ldt will incentivise owners to remove tonnage.

The market has seen an oversupply of vessels, which were delivered at a time of slowing demand from key regions. That led to the worst rates since the 1980s.

The age of scrapping candidates, currently at 15 years or over, will drop once the regulation comes into force next September, said Mr Spyrou, as the cost of installing expensive equipment when the next special survey is due may well outweigh the earnings potential.